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Small Business Guide To Overlooked And Uncommon Tax Deductions

Owning a small business is a taxing proposition, and not just in the most literal sense. Managing every aspect of a business venture takes a lot of time and effort, so doing everything possible to maximize your profit — your reward for your toil — makes sense. That includes reducing your income tax obligations by making sure you claim all of the small business tax deductions to which you are legally entitled.

The complexity of our tax system makes it all too easy to overlook some legitimate deductions. The accompanying small business tax deductions guide provides just a few of the many overlooked tax deductions and uncommon tax deductions that small businesses regularly fail to claim.

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FAQ: Can the IRS deny or revoke my US Passport if I owe back taxes?

Answer: Yes. Congress passed the Fixing America’s Surface Transportation (FAST) Act on December 4th, 2015. As part of FAST, section 7345 of the US Tax Code was enacted which requires the IRS to notify the State Department of taxpayers certified as owing a seriously delinquent tax debt.

A seriously delinquent tax debt is defined as an unpaid, legally enforceable federal back tax that:

  1. Has been assessed. An assessed tax means you’ve exhausted your due process rights and the back tax is an IRS account receivable. For example, if you’re challenging a tax audit, such as in appeals or US Tax Court, then the tax is proposed, not assessed.
  2. The back tax owed exceeds $50,000 inclusive of penalties and interest. The $50,000 amount owed threshold is adjusted for inflation and has not been adjusted in the 2017 tax year.
  3. A Notice of Federal Tax Lien has been filed and your right to challenge the filing in a collection due process hearing has been exhausted or lapsed or a levy has been made after notice and demand for payment.

According to section 7345 of the US Tax Code, the term seriously delinquent tax debt excludes a tax debt that is being paid back in an IRS installment agreement, offer in compromise agreement, or for which a collection due process hearing is pending, or innocent spouse relief has been requested.

After the IRS certifies that an individual owes seriously delinquent tax debt, it must notify the State Department if the certification is found to be erroneous or the relevant debt is satisfied or ceased to be a seriously delinquent tax debt as defined above.

The IRS is changing as a result of its reduced staff. Generally speaking, the IRS used to garner attention by having an employee known as a Revenue Officer show up at your place of business or home when you owed significant back taxes. Now the IRS is using an automated collection system, in addition to Revenue Officers, that can levy bank accounts, garnish wages, and, yes, not issue or renew a passport. The IRS is beginning to grab the taxpayer’s attention by its new ability to stop the taxpayer from traveling outside of the US when there is seriously delinquent tax debt. At the Law Offices of Todd S. Unger, Esq. LLC, we can help you avoid the denial of or revocation of your passport. Contact the Law Offices to resolve your tax matter today.

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The Dangers of Unpaid Back Payroll Taxes

Notwithstanding IRS budget cuts, my tax practice has experienced an uptick of unpaid payroll tax investigation cases. I have also observed that payroll cases are move faster through the IRS collection process than non-payroll cases. I anticipate the IRS will continue to focus on back payroll taxes during the 2017 tax year.

In 2015, the IRS launched its Early Initiative Project to stop non-compliant businesses from accruing back payroll taxes. The goal of Early Interaction Initiative was to enhance the Federal Tax Deposit (FTD) Alert process by finding delinquent taxpayers before they filed their Employers Quarterly Return (Form 941). FTD Alerts identify semiweekly depositing employers that are not compliant with their payroll tax deposits. Once the IRS was alerted of a missed payroll deposit, a Revenue Officer, an IRS Collection personnel, would contact the business before the filing of the Form 941. Therefore, the goal was to curb back payroll taxes before they occurred. I wrote a blog about the Early Initiative Project that can be found here.

Last year, the Department of Justice issued a reminder that businesses must comply with their payroll tax responsibilities. In its release, the Department of Justice stated that it was committed to enforcement action against businesses that fell behind on payroll taxes. DOJ warned that noncompliant businesses are exposed to civil and criminal action for failing to withhold, report, and pay employment taxes. The link for the press release can be found here.

What are the Types of Unpaid Payroll Taxes?

A payroll tax is comprised of income tax, Federal Insurance Contributions Act (FICA), and the Federal Unemployment Tax Act (FUTA). The federal income tax is collected by the employer through withholding. Half of the FICA taxes, which fund Social Security and Medicare, are the employer’s responsibility while the other half is the employee’s responsibility. The employer’s half is withheld from the source of the payment. The final type of payroll tax is FUTA which is the employer’s responsibility.

Trust Fund Taxes are the employees withholding and the employer’s share of the FICA taxes. Similar to a sales tax, the monies are collected by the employer and held in trust for the benefit of the Government. The government is serious about the collection of the trust fund taxes because failing to collect and remit trust fund taxes is embezzlement. By failing to pay your payroll taxes, you are misappropriate taxes placed in trust.

Penalties of Unpaid Payroll Taxes

Both the civil and criminal statute for the failure to remit payroll taxes are virtually identical. The civil statute which can be found at 26 Internal Revenue Code 6672 reads as follows:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

The above statute is known as the Trust Fund Recovery Penalty (“TFRP”). The TFRP is a weapon Congress provided the IRS. By invoking the TFRP, the IRS can pierce through a corporation and assess unpaid trust fund taxes against individuals. For the government to propose an assessment of trust fund taxes, the individual must meet the following prerequisites:

  1. Responsible for collecting, truthfully accounting for, and paying over a tax to the government; AND
  2. Willfully fail to do so, or willfully attempt in any manner to evade or defeat the tax or its payment.

Both requirements must exist simultaneously for each quarter that a payroll tax is due and owing. State protection afforded to limited liability companies will not circumvent the assessment of the TFRP. Further, a tax bankruptcy will not discharge trust fund taxes.

The criminal statute which is found under 26 IRC 7202 states the following:

Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.

Therefore, the same elements under the civil statute are identical to the criminal statute. The individual must be responsible and willful.

Interviewing Possible Responsible Persons, The Danger of the Form 4180 Interview

When a business fails to pay its payroll taxes, the IRS investigates individuals it believes were both responsible and willful. The individuals can be the owner of the business, a shareholder, member, investor, payroll company, officer, employee, signatory on a bank account, etc. The goal of the IRS Revenue Officer is to go after as many pockets to collect unpaid trust fund taxes. If the IRS satisfies the prerequisites of IRC 6672 (responsible and willfulness), it will propose the Trust Fund Recovery Penalty. In its investigation, the IRS may request a financial disclosure on a Collection Information Statement for Wage Earners and Individuals (Form 433-A) to ascertain if the target interviewee has collection potential.

In order to establish a case for a responsible and willful party, the IRS Revenue Officer will conduct a Form 4180 (Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Tax). The Form 4180 interview is a structured interview that mimics the statute and caselaw to ascertain whether a person is both responsible and willful. In addition, the Revenue Officer will go out in the field and investigate. The Revenue Officer may issue a bank summons, visit the business, the taxpayer’s home, etc.

What is concerning about a 4180 interview is that a Revenue Officer will request that the target interviewee signs the interview under the penalties of perjury. If you are admitting to the government that you are both responsible and willful for the failure to remit payroll taxes, then you are providing the government direct testimony under the penalties of perjury to committing a crime under the criminal statute 7202. After all, both of the prerequisites are identical (responsible and willful). Accordingly, the interview exposes the target to criminal exposure. This is why you should hire a tax attorney when the IRS investigates you for the failure to pay payroll taxes.

Contact the Law Offices of Todd S. Unger, Esq. LLC

The Form 4180 interview benefits the government and not the interviewee. Often, a Revenue Officer will rush a taxpayer through the interview and have them sign the document before allowing the interviewee a chance to review their responses. It’s not uncommon through a Freedom of Information Act request to uncover misinformation on the Form 4180. If investigated, you must take time to carefully review the form before signing and request a copy. A tax attorney can assist in preparing you for the interview.

Being interviewed by the IRS for back payroll taxes is serious. You can expose yourself to criminal prosecution and large civil liabilities. Unlike unpaid income taxes, back payroll taxes is a form of embezzlement. How to comply with a government investigation is critical. In large back payroll cases, it could be dangerous to conduct a direct interview with the IRS. What you say can be held against you if the government decides to prosecute under the criminal statute 7202. A tax attorney can assist in deciding whether to cooperate with the government’s investigation.

On the civil tax side, the personal exposure can destroy you financially. Sometimes good intentioned people start their dream businesses and due to unforeseen events get behind in payroll taxes. These are people that never dreamed of having a tax problem. Unlike other business debts, back payroll taxes cannot be avoided if you shut the business down or file a tax bankruptcy. That’s why it’s important to understand all of your options, including, but not limited to, appealing the government’s proposal, suing the government in US District Court, or resolving the back taxes with an installment agreement or a tax settlement known as an offer in compromise. The IRS is neither in a position nor allowed to provide legal advice. A tax attorney can guide you in the right direction and work to resolve your tax matter in the most efficient manner. Contact the Law Offices of Todd S. Unger the moment the IRS contacts you to conduct an interview (877) 544-4743.

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4 Benefits Of Using A Tax Attorney vs. Representing Yourself

Are you currently caught in the middle of a tax dispute? If so, then you may be understandably intimidated by the idea of facing the IRS. This can be a very stressful time, and the last thing you need is to face the situation alone. By working directly with an experienced tax attorney, you can receive the legal guidance and representation needed to resolve your case. Specifically, there are numerous tax attorney benefits that can make the situation much less stressful.

1. Navigate Complex Laws and Codes
IRS tax laws and codes are constantly changing, with new codes being published each tax year. Trying to stay up to date on these changes, and how they apply to you, can be extremely cumbersome. By working with a tax attorney, you can rest assured that the attorney representing you has the knowledge and understanding needed to help with your case while also making complexities of tax law easier to understand.

2. Confidentiality and Attorney-Client Privilege
When working with a professional tax attorney, you have a safe environment in which to disclose confidential information. This is known as the attorney-client privilege. You aren’t afforded this same privilege when speaking with your accountant or enrolled agent. The attorney-client privilege is vital when it comes to protecting both your rights and your privacy — particularly when being accused of a tax crime.

3. Receive Skilled Negotiation Assistance
What if you’re facing a situation where you owe a substantial amount in back taxes (and simply cannot afford to pay them) or the IRS is auditing your tax return? This is where having the proficient assistance of a tax attorney can make all the difference. Negotiating with the IRS requires knowledge of the tax law and an understanding of tax procedure. You cannot understand the strengths and weaknesses of your case if you do not have a good understanding of substantive tax law and procedure. Having a tax attorney who handles IRS disputes can help you negotiate the best possible settlement based on your individual facts and circumstances. Of course, there are never any guarantees when negotiating with the IRS, but your chances will be much better if you bring a knowledgeable tax attorney to the table with you than if you were to do this alone.

4. Provide a Legal Solution to Resolve the Case in Your Best Interest
The IRS cannot provide legal advice, counsel you on ways to reduce the taxes owed, assist you on substantiating items on your return, or advise you on whether or not a tax motivated bankruptcy is in your best interest. The IRS’s mission is to enforce the tax code and collect back taxes from you in the least amount of time. People working at the IRS have managerial pressure to move cases along and collect taxes. Therefore, IRS personnel will not patiently wait for you to substantiate deductions claimed on a tax return or provide you the time to get your finances back in order. A tax attorney will advocate on your behalf, ensure the IRS is following proper protocol and advise you on the best way to resolve your tax problem in the most expeditious, tax-efficient way.

5. Achieve Long-Term Savings
One of the biggest mistakes people make when it comes to facing the IRS is failing to hire a tax attorney because they think they can’t afford it. In reality, you can’t afford not to have a tax attorney on your side. Because a dedicated tax attorney always acts with your best financial interests in mind, having one represent you could save you a significant amount of money when all is said and done. Whether through negotiating a lower tax settlement with the IRS, working out a payment plan, having hefty penalties waived, assisting in tax compliance, or anything in between, having a tax attorney on your side is always in your best financial interest.

Turn to Todd S. Unger, Tax Attorney
Now that you have a better idea of the many tax attorney benefits offered by hiring a professional, it’s time to find somebody you can trust to represent you every step of the way. Todd S. Unger is an experienced tax attorney who fights tirelessly for all of his clients. Contact his firm today to set up a confidential case consultation.

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The IRS is Terminating my Installment Agreement

You worked hard to negotiate an IRS installment agreement. You remained compliant with the terms of the agreement for a couple of years, and then, all of the sudden, you were preparing to file your 2015 return and noticed you will owe a significant tax liability.  To make matters worse, you do not have the money to pay your taxes.

This is a common problem for many who negotiate installment agreements with the IRS. The terms of all IRS installment agreements require future tax compliance. Future tax compliance means timely filing and timely paying all future taxes.   The problem with future tax compliance is that you can be blindsided by unexpected events, such as an audit, misinformed about a transaction that causes a large tax bill, or by not adequately withholding during an extremely profitable tax year.

Should I hire a Tax Attorney if I Breach my Installment Agreement?

I know that I’m biased here, but the answer is yes . . . and you should hire a tax attorney before you breach your agreement.

How can I anticipate I’m about to Breach my Installment Agreement?

Any time there is an event or transaction in your life such as purchasing or selling real estate, starting a business, hitting the lottery, inheriting money, negotiating a settlement with a creditor, receiving an incorrect 1099, filing for divorce, moving abroad, an audit etc., you should hire a tax attorney before the transaction or event occurs or, worst case scenario, immediately thereafter. This is especially true if you have an agreement with the IRS such as an offer in compromise, voluntary disclosure agreement, or installment agreement.   A tax attorney can assist in structuring the transaction in a tax advantageous way while also avoiding an action that could breach your negotiated settlement with the IRS.

What will the IRS do if I Breach my Installment Agreement?

If you breach your installment agreement, then the IRS will issue a Notice of Intent to Levy, Intent to Terminate Your Installment Agreement letter. The Notice of Intent to Levy letter forcefully requests the amount of back taxes you owe be paid in full immediately. The IRS letter will threaten to seize or levy your bank accounts, business assets, personal assets, social security benefits, yes social security benefits, and wages. Further, if you have negotiated an IRS installment agreement that avoids a tax lien, then the IRS may immediately file a Notice of Federal Tax Lien to secure its interest against other creditors. Tax liens can end a career, destroy credit, and wreak havoc on selling your property.

Stop the IRS from Garnishing my Wages, Levying my Bank Account, and Seizing my Assets

The tax solution is . . . ready: Addressing the breach of your IRS installment agreement immediately. That’s it. Once you notice or anticipate you will owe taxes, then you must “take action” immediately. Take action means notifying the IRS before the breach occurs or immediately thereafter.

If you contact the IRS before filing a return with a balance due, the IRS can add the new balance to the installment agreement as long as the total amount of back taxes does not exceed $50,000 and full pays the tax within the collection statute of limitations period. The IRS has 10 years to collect a tax unless it seeks a judgment which provides an additional 20 years under state law in New Jersey. Therefore, the key is to resolve the resolve tax debt before it occurs.

If your tax matter exceeds $50,000 or you cannot afford to repay the IRS, then you should contact a tax attorney immediately. If your debt exceeds $50,000 the IRS will require an intrusive financial disclosure. During the financial disclosure process, the IRS will seek to liquidate assets and obtain as high a monthly back tax payment as it deems appropriate. The financial disclosure process benefits the IRS, not you.

Contact a Local Tax Attorney

I am a local NJ tax attorney in with an offices located in Mt. Laurel, New Jersey and Woodbridge, New Jersey. When you call, you will be speaking to me, not a tax resolution firm’s sales guy. IRS issues are sensitive, painful, embarrassing, and difficult to overcome. I know because I battle the IRS day in and day out. There is a light at the end of the tunnel and the Law Offices of Todd S. Unger is here to provide a solution out. End this problem once and for all by calling us. Come in and speak to a tax attorney today (877) 544-4743.

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IRS Early Interaction Initiative: The Government’s Plan to Stop Employers from Owing Unpaid Back Payroll Taxes

In 2016, the IRS Collection Division launched its new program called the Early Interaction Initiative. The program’s goal is to stop employers from owing significant back payroll taxes.

If you have employees, then your business must withhold payroll taxes from your employees’ wages and salaries. These are known as trust fund taxes. Employers are required to withhold income and Federal Insurance Contribution Act (FICA) taxes from their employees’ gross pay. The monies are to be held in trust and remitted to the Treasury. The failure to comply with your federal tax deposit requirement will result in a serious tax problem.

Under IRC 6672, the IRS can assess the trust fund recovery penalty if you fail to remit payroll taxes. The trust fund penalty is a weapon Congress gave the IRS whereby the IRS can pierce through a corporation and assess corporate payroll taxes to individuals it deems responsible and willful. Additionally, under IRC 7202, the IRS can assert criminal penalties for the failure to make your federal tax deposits.

Often times, a payroll tax problem is the cause of an economic downturn of a business. In order to weather the storm, a business will use the proceeds withheld from employees pay for working capital or for other purposes to keep the business afloat. As a result, the back payroll taxes plus penalties and interest can mount quickly and pyramid into a large tax debt. The payroll Early Interaction Initiative is looking to stop payroll tax debt before it starts.

How does the Payroll Tax Initiative Work?

The IRS collection personnel use Federal Tax Deposit Alerts (FTD Alerts) to notify when an employer is noncompliant with their deposits. Employers withholding income taxes and FICA taxes from their employees’ paychecks are required to report those taxes quarterly on the Form 941. In the past, the IRS would begin an investigation after the delinquent business filed its Form 941. The goal of Early Interaction Initiative is to enhance the FTD Alert process by finding delinquent taxpayers before they file their Form 941s.

Once the IRS gets an FTD alert, it will send the taxpayer a letter or generate an automated phone call informing the business it has fallen behind on its payroll tax obligations. According to the IRS, the letter will advise the business of its payroll tax requirements and the consequences of not complying with those responsibilities. The letter will require a response from the employer.

If there is a reason for the decline in payroll deposits, for example a decline in the employer’s staff, then the case is closed. If the employer does not respond or have a valid explanation as to why the payroll deposits are down, then it will send a Revenue Officer to visit the business. A Revenue Officer is an IRS employee delegated with the responsibility to enforce tax compliance and collect back taxes. Where there is no explanation, the Revenue Officer will work with the employer to correct the delinquent condition and address the unpaid tax, penalty and interest.

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Two-thirds of federal taxes are collected through the payroll tax system. The IRS has gone through a serious of budget cuts since 2007. As such, the IRS has lost out on collecting unpaid payroll taxes. The Early Interaction Initiative signals the IRS is having its depleted personnel focus on unpaid payroll taxes. If you or your business has received contact from a Revenue Officer or Criminal Investigator regarding unpaid payroll taxes, then your tax matter is serious. If the IRS deems you responsible or willful, then you can suffer serious financial harm or be prosecuted criminally. The Law Offices of Todd S. Unger, Esq. will defend you against the trust fund recovery penalty or criminal payroll tax prosecution. To resolve your unpaid payroll tax matter, contact Law Offices of Todd S. Unger today (877) 544-4743.

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Biggest Mistakes to Avoid During the 2016 Tax Year

There are common causes to tax problems that I see year after year. With the 2016 tax season and tax year upon us, it is a good time to identify and stop tax issues before they spiral out of control. Below are some of the common tax problems that I see that cause my clients to owe significant back taxes and can lead to a criminal tax investigation.

1) Hire a CPAThere is no such thing as a basic return. Even if you are not self-employed and don’t own a house, a return can be difficult. The tax laws and reporting requirements are complicated when it comes to claiming dependents, earned income tax credits, writing off medical expenditures, claiming charitable deductions, etc. So much can go wrong when preparing your taxes. Although the IRS budget is down, the government is adept at auditing questionable returns with computer algorithms. Generally speaking, the IRS has three years to conduct a tax audit. Typically, returns are picked up in the second and third tax year after filing. By that time, you have probably made the same mistake year after year and now owe several years of back taxes. Hiring a CPA will help avoid making errors on the tax return and curb future mistakes.

When hiring a tax preparer, you should ask about their credentials. Many of my clients think they are hiring a certified public accountant, but, in fact, are hiring someone with little or no experience and no license. My firm defends tax preparer investigations where the preparer does not have a good command of the tax law and makes costly mistakes in preparing their clients returns. At least, an active CPA license would display competence that the preparer has completed their continuing education requirements and is staying abreast of the constantly changing tax laws and reporting requirements.

For those of you who cannot afford a CPA, there are taxpayer clinics available that can be found on the IRS’s website:

If you needed to have a medical procedure, you would not handle the procedure on your own or ask a friend to help you; rather, you would go to the doctor.   The same is true for preparing and filing your taxes. A botched tax return can cause harm to your financial health. Do not be a pennywise and a pound foolish.

2) Stay Compliant with your estimated tax payment requirementsThe IRS will not negotiate a tax settlement, known as an offer in compromise or a payment plan if you have not paid the appropriate amount of taxes throughout the year. Additionally, if you are eligible to discharge your taxes in bankruptcy, yes this can be done, then when you get out of bankruptcy you are going to owe more back taxes if you are not timely paying your taxes. Generally speaking, the government requires you pay at least 90% of the taxes for the current year or 100% of the tax shown in the prior year.  If you are self employed, then you should be completing a profit and loss statement at least quarterly to determine if you are on track. The failure to pay your estimated taxes can cause a large amount of back taxes being owed both to the IRS and state.

3) Ensure that you’re withholding enough from your paycheckThis is one problem that is easy to avoid. When you start your job, your employer provides you with a document called a Form W-4. Basically, the Form W-4 is an Employees Withholding Allowance Certificate that asks a series of questions to ascertain the total amount of exemptions. Many times, people do not complete the form properly. They take too many exemptions or experience lifestyle changes throughout their employment. If this is the case, then you must revise the Form W-4. If you owe money, basically more than $1,000, on your 2015 taxes, then you should tweak your withholding exemptions especially if you could not pay the prior years’ taxes. The failure to do so will result in owing back taxes.

4) If you won a lawsuit settlement, then seek a tax attorney: The tax laws are incredibly complex when analyzing legal settlements. Believe it or not most settlements are taxable. There is usually a boiler plate provision in most lawsuit settlements that states the “proceeds will be subject to Form 1099 reporting and to seek advice from a tax attorney.” Most of the time, my clients inform me that their attorney stated the settlement is not taxable. When filing their return, they do not report the proceeds. Because the proceeds were reported to the government by way of the Form 1099, the client receives an audit letter from the IRS. My advice is to hire an income tax attorney if you won a lawsuit settlement. If you cannot afford an attorney, then at the very least, check out IRS Publication 4345 ( before filing your taxes.

5) Use a Payroll Company: I think individuals and businesses do not understand the risk they face both to the survival of their business and freedom. When you have a payroll tax problem, the IRS can pierce through your corporation and assess the payroll taxes to you individually. To demonstrate the seriousness of a payroll tax problem, the civil statute (IRC 6672) and criminal statute (IRC 7202) for the failure to pay payroll taxes is virtually identical. That is very scary. A payroll tax company is inexpensive and can help you with adequately depositing and filing your payroll tax returns. Filing and taking care of your own payroll is cavalier.

6) File your tax returns timely to avoid onerous penalties and criminal exposure: While it is true the IRS will take a longer time to catch up with the non-filer, you are losing refunds and costing yourself so much money by not filing. Generally speaking, you have three years from the due date of a tax return plus extensions to claim a refund. Many of my clients have forfeited their refund to the federal government by failing to file a tax return timely.

If you owe money when filing your taxes, then you will be assessed with an estimated tax penalty, failure to pay penalty, failure to file penalty, and statutory interest. When you tack on all of the penalties and interest, the amount can run as high as 50% of the taxes owed; however, if you file timely, you can shave off about 25% of the penalties. Generally speaking, the failure to file penalty runs at .5% per month the return is late up to 25%. By filing timely you can avoid this penalty plus the interest.

7) Do not liquidate your qualified retirement plan: This one is a killer especially if you are under the age of 59 ½. The great thing about a qualified retirement plan such as a 401k, 403b, 457(b), traditional IRA, SEP, etc. is the deferral of taxes on income. When many of my clients face a financial hardship, they tap into their retirements without withholding for taxes. To make matters worse, my clients that are under 59 ½ get hit with a 10% early withdrawal penalty on top of the income tax owed. The best move is to borrow against the plan, if possible. There are some exceptions to the 10% tax depending on the type of plan and the usage of funds. Before tapping into a retirement plan, you should speak with a tax attorney.

8) Because your money is offshore you think that you don’t have to pay taxes: All US Citizens are taxed on worldwide income. The definition of a US Citizen is broad and captures individuals with green cards and people living in the US illegally. A US Citizen is taxed on all worldwide income. Additionally, you may need to file annual reports to report foreign assets such as FinCen Form 114 (known as an FBAR), Form 8938, Form 5471, Form, 5472, Form 3520-A, etc. If you have an obligation, but fail to file the aforementioned forms, you can be assessed penalties ranging from $10,000 per each violation to criminal prosecution. If you own foreign assets, you should hire a competent preparer or tax attorney with international experience.

9) Don’t fight the IRS alone. If you are getting audited, owe back taxes, are under criminal investigation, have unreported offshore accounts, then you should hire a tax attorney. Yes, I am biased here, but here is why you should hire a tax attorney. The IRS and your interests are adverse. Therefore, the IRS is not looking out for your best interests. 

The IRS is not in a position to offer legal advice and many times is incorrect. Accordingly, if a tax motivated bankruptcy is an option, then the IRS cannot offer you legal advice to file bankruptcy. Often times, the IRS does not know the law and misstates information. I do not believe the misinformation is intentional. Contrary to what you hear in the news, most people that work at the IRS are patriots; however, the laws are voluminous and complex.

Many letters that the IRS disseminates have procedural rights associated with them. By ignoring letters or not responding adequately, you could be missing out on opportunities to challenge your tax dispute. Having a tax attorney copied in on all correspondence can ensure that you adequately exercise your procedural rights.

Finally, you do not want to speak with the IRS especially if you are being audited, have failed to file a return, neglected to pay your payroll taxes, have not reported offshore accounts, owe significant back taxes, failed to report income, or have overstated your deductions. The IRS is adept at getting taxpayers to talk. Remember, the IRS is not your friend and, at the end of the day, they are doing one job: to enforce the laws of the tax code which you may not have followed properly.

Contact US

You should discuss with a tax attorney whether or not you are on pace with your compliance requirements or are making any of the above mistakes while the 2016 is young. The Law Offices of Todd S. Unger, Esq. LLC resolves tax matters exclusively. Tax Attorney, Todd Unger resolves simple to the most complex tax disputes with the IRS and state. Call a tax lawyer today (877) 544-4743.

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If you Owe Back Taxes, You May Have to Change Your Travel Plans

President Obama signed a highway and transportation spending bill titled “Fixing America’s Surface Transportation Act” or the “FAST Act” (P.L. 114-94) which takes effect January 1, 2016. The legislation contains two significant back tax collection provisions of which you must be aware. First, is a new tax code section authorizing the government to revoke passports if you owe back taxes. Second, is a provision directing the government to hire private tax collectors.

How can the Government Deny or Revoke a U.S. Passport if I Owe Back Taxes?

The FAST Act adds Section 7345 to Title 26 of the US Tax Code. The new section authorizes the government to deny the application for a new passport or renewal of an existing passport if you owe more than $50,000 in back taxes of “seriously delinquent tax debt.”

What Does the Government Consider a Seriously Delinquent Tax Debt that can lead to the Revocation of my Passport?

The term seriously delinquent tax debt is defined as back taxes in which the government files a Federal Tax Lien or taxes in which the government has issued its prerequisite to levy.

Excluded from the definition of a seriously delinquent tax debt is a tax being paid under an installment agreement, offer in compromise, or if collection is suspended under a collection due process hearing.

The passport suspension rule is similar to New York’s enforcement provision with respect to the suspension of driver’s licenses for unpaid taxes. As long as you are working on or have executed a tax settlement, payment plan, or some alternative to collection, the government will not suspend your passport. The key is opening the lines of communication with the IRS and being proactive in resolving your tax debt.

Can I enter the US if I Owe Taxes?

Yes, under the FAST Act the government could revoke a passport upon reentry into the U.S. If the government decides to revoke a passport, they can limit a previously issued or issue a limited passport exclusively for return travel to the United States.

Congress added a provision permitting the Secretary of State to issue a passport, in emergency circumstances or for humanitarian reasons.

The Hiring of Private Tax Debt Collectors

The FAST Act directs the IRS to contract with private collection agencies. The government hired private tax debt collectors twice in the past and, according to the IRS and Taxpayer Advocate, the effort was ineffective at collecting back taxes. Congress ignored both the IRS Commissioner and Taxpayer Advocate because the use of private tax collectors projected revenue of $2.4 billion over 10 years.

Private tax debt collectors will be used on inactive tax receivables exclusively. The FAST Act defines an inactive tax receivable as a case the IRS has removed from its active inventory because of a lack of resources or inability to locate the taxpayer, a case where more than 1/3 of the collection statute of limitations period has elapsed and the case has not been assigned to an IRS employee, or a case where more than 365 days have passed without interaction between the IRS and the taxpayer.

The FAST Act precludes the IRS from contracting out cases where the taxpayer:

  • has a pending or active installment agreement or offer in compromise;
  • proposed innocent spouse relief;
  • is under examination, litigation, criminal investigation, or levy;
  • is under age 18; and
  • is in a combat zone or deceased.

Therefore, the cases which will be delegated to private debt collection agencies are finite taxpayer accounts.

The tax debt collection agencies must adhere to the Fair Debt Collection Practices Act.

Contact Tax Attorney Todd S. Unger, Esq. Today

The FAST establishes a Special Compliance Personnel Program Account which is dedicated exclusively to fund IRS collection personnel such as the Automated Collections Unit (ACS) and Revenue Officers.  Therefore, if you have not addressed your delinquent tax debt, then you must act now. The key to avoiding the enforcement provisions of the FAST Act is making a proposal to such as an offer in compromise, applying for innocent spouse relief, requesting an appeals hearing, installment agreement, filing bankruptcy or challenging the tax debt owed. The Law Offices of Todd S. Unger can help you stop IRS enforcement action and resolve your back taxes. There is not time to wait. The provisions of the Fast Act are effective January 1, 2016. To avoid enforcement action, speak to tax attorney, Todd Unger today (877) 544-4743.

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Owe NJ Back Taxes? The Division of Taxation Updated its Deferred Payment Plan Guidelines

The Division of Taxation updated its guidelines regarding tax payment plans.  To be granted an installment agreement, the NJ Division of Taxation instructs taxpayers to include all delinquent years and file all unfiled tax returns.  Therefore, similar to the old guidelines, tax compliance is essential to resolving your back taxes.

What if I Owe Personal Income Taxes to the NJ Division of Taxation?

Generally speaking, the Division will grant payment plans ranging from Three (3) to Thirty-Six (36) months long.  If you cannot pay within THIRTY SIX (36) months, then the Division of Taxation instructs taxpayers to contact the assigned caseworker or the Deferred Payment Control Unit for approval. In my experience, if you want to pay your back taxes beyond THIRTY SIX (36) months, then the Division will require you submit a financial disclosure justifying a longer payment plan.

The Division reminds taxpayers that while paying off your back taxes, interest accrues on the unpaid balance over the duration of the plan.  Currently interest is 6.25% compounded annually.

How Can I Get Rid of a New Jersey Tax Lien?

The best way to get rid of a NJ tax lien, known as a Certificate of Debt, is to avoid it.  NJ does not have the Fresh Start Initiative Program like the IRS.  In 2013, the Fresh Start Initiative Program was established by the IRS to help taxpayers resolve back taxes and avoid or assist in the withdrawal of a federal tax lien.  Once NJ files a tax lien, the only way to get rid of it is to pay the tax, successfully challenge the liability on a motion to revive or in bankruptcy court.

Once NJ files a tax lien, the damage is done.  A NJ Certificate of Debt is valid for 20 years with the ability for the NJ Office of the Attorney General to revive the lien for another 20 years.  Once the tax lien is paid in full, a taxpayer will receive a Warrant of Satisfaction.  The Warrant of Satisfaction stays on a NJ taxpayer’s credit for approximately 6-7 years.  Therefore, the best way to resolve a NJ tax lien is to avoid it.  The Division of Taxation provides the following guidance pertaining to payment plans and tax lien filings:

  • If you owe NJ less than $2,500 in back taxes, you can avoid a tax lien if you tender timely payments under your agreement and remain compliant with your NJ tax filings.
  • If your owe NJ tax debt of more than $2,500, then you can avoid a tax lien if you pay your back taxes in less than 12 months.
  • If you owe more than more than $2,500 and can pay within 12 months or less, then you can avoid a tax lien if you pay the amount owed within 12 months.

As long as you satisfy the aforementioned thresholds and stay compliant, you can circumvent a tax lien filing.  Compliance means making timely payments under the plan and remaining current with your NJ filings.

If you breach the NJ installment agreement, then NJ will file a tax lien in the NJ Superior Court and, to add insult to injury, will charge you the cost of collection (10% of the outstanding liability).

Unfortunately, if your tax debt is over $2,500 and your plan is greater than TWELVE (12) months, then NJ will file a tax lien and charge you the 10% cost of collection fee.

What Happens to my Tax Refunds if I’m in a NJ Payment Plan?

New Jersey is the administrator and participant of set-off programs.  A set-off program stops payments from the federal and state government while owing money to the government.  Therefore, while you are paying down back taxes in a NJ payment plan, NJ will take both your federal and state refunds, including SAVER, Homestead Rebates, and payments owed to your business for services rendered to NJ or the federal government.

How does my business pay back NJ Tax Debt?

The payment plan guidelines and lien filing thresholds for businesses tax debt is similar to the individual payment plans.

  • If the tax debt you owe is less than $2,500, then you may receive a Certified Notice and Demand Letter.  You can avoid a NJ tax lien, if you stay compliant with the terms of the installment agreement and your tax obligations.
  • If the tax debt you owe NJ is over $2,500, and you pay the amount is TWELVE (12) months or less, then you can avoid a NJ tax lien if you stay compliant with the terms of the installment agreement and your tax obligations.
  • If your tax debt is above $2,500 and your plan is more than TWELVE (12) months, the NJ Division of Taxation will file Certificate of Debt in Superior Court and tack on a 10% collection fee.

If your payment plan is greater than THIRTY SIX (36) months, the Division states you will be forwarded to an outside collection agency. The Division of Taxation has been using Pioneer Credit Recovery as its collection agency. The Division of Taxation may require you submit a financial disclosure to justify a longer payment plan. Typically, the financial disclosure is reviewed by an investigator.  The Division warns that a 10% collection fee, and others, will be added to the amount of back taxes you owe.  Similar to the individual plans, interest will continue to accrue on the unpaid balance over the duration of the plan.

The NJ Tax Guidelines are located at the Division’s website at:

Contact Tax Attorney Todd S. Unger, Esq. Today

Handling a New Jersey back tax matter can be difficult especially when you owe other taxing authorities and creditors.  The Division’s rigid guidelines and policies regarding the filing of tax liens can destroy businesses and create a burden on households.  The Law Offices of Todd S. Unger, Esq. has experience resolving tax disputes with the NJ Division of Taxation and the NJ Office of Attorney General.  Call tax attorney, Todd S. Unger today (877) 544-4743.

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Are You Worried About An IRS Audit? Audit Rates Down for a Fifth Straight Year

What are my Chances of Getting Audited?

The IRS reported audit rates for individual tax returns fell to its lowest level in a decade. According to the IRS, the individual exam rate has dropped 22% since the 2010 fiscal tax year. The drop brings the 2015 fiscal year audit rate to .84%.

The IRS attributes the decline to a series of budgetary cuts since 2010. According to the IRS Commissioner, John Koskinen, the IRS has lost 5,000 enforcement personnel in charge of tax collections, exams, and criminal tax enforcement.

Not all individual IRS audits have declined

Under IRC 7602, Congress provided the IRS with the authority to exam a taxpayer’s books and witnesses to ascertain the correctness of a tax return. There are different ways the IRS can audit you. The IRS can conduct an audit at its office (office audit), through the mail (correspondence audit), or at the taxpayer’s office (field audit). According to the IRS, field audits declined from 291,000 in fiscal year 2014 to 267,000 in fiscal year 2015 while correspondence audits increased from 951,000 to 961,000. Generally, the catalyst for a correspondence audit is income and payment information from third parties, such as Form 1099, W-2s, Form 1098(s), not matching to the return. For example, if you forgot to include a 1099 from a side job on your Form 1040, then you would receive an IRS letter, (CP 75, Letter 525, CP 2501, CP 2000, Letter 3219 (aka the 90 day letter), informing you of the missing information and proposing a tax liability.

The IRS’s mission is to ensure compliance with the US Tax Code. According to the IRS Commissioner, the federal government is “leaving tax revenue on the table.” The IRS Commissioner cites reports that conclude that every $1 invested in the IRS produces $4 in revenue.” It is the Commissioners opinion that without funding the IRS, you are welcoming tax cheats. Not all in Congress agree and believe in light of recent scandals, the IRS is a rouge organization that is adequately funded and mismanages the money provided. Notwithstanding the foregoing, statistics report that tax audits rates declined.

Contact Tax Attorney Todd S. Unger, Esq. Today

If you are the unlucky few undergoing an audit, then contact a tax attorney today. Todd S. Unger, Esq. can defend you against civil and criminal tax examinations. Whether you have overstated deductions or understated your income, the Law Offices of Todd S. Unger is prepared to defend you. Contact Todd S. Unger today (877) 544-4743.

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